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In Search of a Taxpayer Bill of Rights With Teeth

Posted on March 28, 2014 by David van den Berg

A taxpayer bill of rights (TBOR) may be a good idea in principle, but unless taxpayers are empowered to seek redress when those rights are violated, it will be just a piece of paper, participants said March 27 at a panel discussion in Washington sponsored by Tax Analysts.

"People are very concerned that they're not going to get a fair appeal [that goes beyond] just a repetition of the Service's position," said Christopher S. Rizek of Caplin & Drysdale, a former Treasury associate tax legislative counsel and trial attorney in the Justice Department Tax Division. "You've got to have some sort of remedy to fix that, and merely having a lovely bill of rights that says you should have this doesn't mean anything if there isn't a commitment within the organization to change it and some enforcement mechanism."

The event focused on National Taxpayer Advocate Nina Olson's proposal to implement a bill of rights that would give IRS employees and the public a shared understanding of how taxpayers should be treated by their tax authorities.

Olson, who joined Rizek and former Treasury Acting Assistant Secretary for Tax Policy Alan J. Wilensky on the panel, has recommended a bill of rights in her annual report to Congress every year since 2007. In the 2013 report, released in January, she suggested that the IRS itself should adopt a bill of rights administratively rather than waiting for Congress to pass legislation.

Olson's proposed rights include the right to be informed, the right to quality service, and the right to pay no more than the correct amount of tax. Even if the rights did not include an enforcement mechanism, having the bill in place would clearly show where remedies are absent and needed, she said.

"The theme that we have for the taxpayer bill of rights is [that] it is your foundation for effective tax administration," Olson said. "Congress needs to have this so that it can hold the commissioner responsible for running an agency in conformity to these foundational rights."

Joseph Henchman of the Tax Foundation suggested that taxpayers perhaps should be entitled to a Miranda-style warning when approached by the IRS, explaining that tax law is at a point similar to where criminal law was before the Supreme Court's landmark decision in that case. "The IRS employees don't know what they're enforcing and taxpayers don't know what their rights are, and there's no remedy," Henchman said. "This sounds a lot like the situation of criminal procedure before Miranda," he added, noting that when police fail to follow Miranda guidelines, the case is thrown out.

Challenges of Moving a Bill

Olson said she sees great interest from IRS leadership and in Congress in adopting a TBOR. She noted that the House has passed a stand-alone bill, the Taxpayer Bill of Rights Act of 2013 (H.R. 2768), which is awaiting action in the Senate. But the problem with getting a bill enacted isn't opposition to it, Olson said.

"I think that when we first came out in 2007, some folks on [Capitol] Hill . . . had the reaction of, 'It's a gimmick, it's meaningless, why would we do this?'" Olson said. "And we really had to do some education initially saying no, it's not a gimmick, and there's really meaning. And that's really all we've heard negative about it -- I think [the problem] really is no opportunity."

Given that Congress is now drowning in disagreement, does that opportunity exist? Wilensky, who served under Treasury Secretary Nicholas Brady in the George H.W. Bush administration, said he supports Olson's proposal but that the political environment matters.

"As we go forward, I think depoliticizing the process is important," Wilensky said. Although Brady ran a totally apolitical Treasury Department, that changed under presidents Clinton and George W. Bush, he said.

Budget Cuts and a Bad Reputation

Olson said IRS funding is crucial to the success of a TBOR. The IRS has cut 10,000 employees and has seen its budget slashed by $1 billion since 2010, according to Commissioner John Koskinen.

"You create these rights, [and] then the IRS has to be funded at a level in order to be able to deliver on those rights," Olson said. "So if you have the right to quality service, then we need to be funded at a level that we can answer more than three out of every five phone calls, and taxpayers don't have to wait almost 20 minutes to get their phone call answered."

Christopher Bergin, Tax Analysts' president and publisher and the panel's moderator, agreed with Olson about the IRS's funding needs. But he juxtaposed that with the recent spate of news that has destroyed the agency's reputation among the public, citing as one example the controversy over a Star Trek parody video that was produced in 2010 for use at an IRS conference.

"Most of the comments that I get are 'Why would we give this agency any more money when it squanders its money?'" Bergin said. Along with the Star Trek video, he said the agency's court fight against Tax Analysts' Freedom of Information Actrequest for training materials showed a penchant for wasting funds. "And so I've got to concede a bit of their point. How do we overcome that?" he said.

Olson, in response, called the Star Trek video and other actions "profoundly stupid" and said she's angry at the people responsible. She said her employees and others at the Service have had to work with sharp cutbacks, while IRS training funds have plummeted 87 percent from fiscal 2010 to the end of fiscal 2013.

"If you think that's a good thing for the tax administration or any taxpayer to have an untrained IRS employee giving instructions, levying on you, examining you, adjusting your account, well, then you really need to think again," Olson said. "And that's the consequence of just one stupid little Star Trek video."

Olson said it was a hard choice in compiling her 2013 report whether to list IRS funding or the lack of a bill of rights as the most serious problem facing taxpayers.

"We went back and forth," she said. "And I basically made the call that if you don't have a taxpayer bill of rights and you give the IRS more money, there's no guarantee that they won't use it in a way that I would disagree with and that maybe taxpayers of the world would disagree with."

The best way to further taxpayer rights now is to ensure the IRS has adequate funding and training, Rizek said. The agency has to be disabused of its current mind-set that all taxpayers are "evil," as it was in the early 1990s, and employees have to be trained so they know what the rules are, he said. The current circumstances are difficult for practitioners, Rizek said.

Wilensky agreed. "It's always better to have a tough, smart, rational person on the other side of the table than someone who really doesn't know how the system works or how the process ought to operate," he said.

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